Amazon avoids charging sales tax for another year

Amazon and the state of California have prepared legislation that would give the online retailer one more year to try and change federal tax policy. This means that Californians could buy online goods without being charged sales tax for another 12 months.

One of the lures of online shopping is not having to pay sales tax. A 1992 Supreme Court decision mandates that consumers don’t have to pay sales tax from online purchases so long as they don’t reside in a state where the online retailer has a physical presence.

Governor Jerry Brown approved an $86 billion budget that would require Amazon and other out-of-state online retailers to collect sales tax from California residents if they had offices, workers, affiliates or any other ties to the state, reports CNN.

The new law that took effect July 1 in the cash-strapped state should have forced Amazon to collect taxes from California residents, a measure that would generate nearly $200 million. According to Reuters, Amazon doesn’t have a “physical presence” here, but they do have a large enough presence that they would be required to collect sales tax.

Amazon announced that they were cutting all ties with their California associates and wrote a referendum to challenge the new law. Furthermore, they offered to build distribution centers in the state in exchange for a tax-free ride.

If the proposed legislation is passed, Amazon would have one more year to try and petition Congress for a national solution. The company has not announced if they plan to reinstate their California affiliate program.